You got a windfall: invest it all now or spread it out?

By DecisionSheet · Updated September 22, 2026 · 2026 tax figures

DecisionSheet's lump sum vs. dollar-cost averaging calculator takes one windfall and runs it two ways: all into the market at once, or fed in over a set number of months while the rest waits in cash. With the calculator's defaults ($60,000, spread over 12 months, cash earning 4.5%, compared after 36 months), the lump sum ends $1,684 ahead on the average path and $5,422 behind on the bear path. Which side finishes ahead is set by one comparison: the path's annual return against the cash yield.

The two methods as the model runs them

Dollar-cost averaging, as the SEC's Investor.gov glossary defines it, means investing money in equal portions at regular intervals regardless of market moves. The calculator runs it month by month:

• Lump sum. All $60,000 is invested at the start and earns the path's return from month 1.
• Dollar-cost averaging (DCA). The $60,000 starts in cash. Each month the cash earns its yield, anything already invested earns the path's return, and then a fixed $5,000 (the amount divided by 12) moves into the market. The last tranche goes in at the end of month 12.

The tranche is fixed at the start, so the interest the waiting cash earns is never invested. On the default inputs $1,472 is still in cash when the last tranche goes in, and it stays there, earning the cash yield, until it reaches $1,608 at month 36. The DCA figure the calculator reports is invested balance plus that cash.

The four paths

The four scenarios share the amount, the 12-month DCA period, the 4.5% cash yield and the horizon. Only the path changes.

Open each path: average · bull · bear · stagnant.

On the average and bull paths the market returns more than cash earns, so every month a dollar spends waiting is a month at the lower rate, and the lump sum ends ahead. At the end of the DCA period (month 12) the average-path lump sum is already at $65,100 against $63,775 for DCA.

On the bear path both sides end below the $60,000 put in. The lump sum takes the full decline for all 36 months and ends at $33,082; the DCA side loses less, ending at $38,504. The part still waiting in cash is out of the falling market and earns 4.5%; each tranche joins the decline only from the month it is invested.

In the first months the DCA total edges up, to $60,364 in month 3, while most of it is still in cash; after that it falls too.

The stagnant path is easy to misread. The market still rises, by +1% a year, and DCA ends $1,276 ahead anyway: the cash yield of 4.5% is higher than the market's 1%, so waiting in cash is the better-paid place to be. There is no downturn on this path.

On all four paths, and in the cash-yield case below, the side ahead at month 36 is ahead in every month before it; the lead never changes hands.

What the cash yield does

The cash yield touches only the DCA side. The lump sum is fully invested from the start and ends at the same figure whatever cash pays. A higher yield raises the DCA total on every path, narrowing a lump-sum lead or widening a DCA one.

The stagnant path shows this most sharply. Lower the cash yield from 4.5% to 0.5%, the lowest the calculator's slider allows, and change nothing else:

Open the stagnant path at 0.5% cash.

The winner flips because 0.5% is below the path's 1%. On the average path the same change widens the lump-sum lead from $1,684 to $3,128.

That is the general rule in this model. The lump sum ends ahead when the path's annual return is above the cash yield, DCA ends ahead when it is below, and the two end level when they are equal. Set the cash yield to 1% on the stagnant path and both sides finish at the same figure, and the calculator reports any gap within $10 either way as a tie. The size of the gap moves with the amount, the DCA period, the horizon and both rates; the direction depends only on the comparison.

What the paths are and are not

The four paths are stylized, not history. Each is one constant annual return, converted to a monthly rate and applied identically every month for 36 months. The average path uses the expected-return input (8.5% by default); the bull, bear and stagnant paths use fixed rates of +22%, -18% and +1% and ignore that input. The stagnant path, labeled "Flat" in the calculator, is a smooth line with no ups and downs. The bear path falls for all 36 months and never recovers.

A real market moves up and down within a period, and a DCA purchase made after a drop buys more shares than one made before it. None of that is in these paths, so the model cannot show dollar-cost averaging gaining or losing from the order of returns. The returns are assumptions, not forecasts.

The calculator's fourth tile, a lump-sum win rate of 66.4%, is a published figure, not computed from the inputs; it is the same on every scenario. It comes from the Vanguard paper Cost averaging: Invest now or temporarily hold your cash? (February 2023): the share of rolling one-year periods, on the Russell 3000 Index for 1979–2022, in which investing at once beat splitting the money into three monthly parts. That is a three-month split, not the 12-month one modeled here. The paper's figure across the MSCI World Index for 1976–2022 is 68%, and 65% for an all-equity portfolio when the waiting cash earns interest.

Assumptions and limits

• One market path per scenario, at a constant rate. No volatility, no sequence of returns, no recovery after the bear path.
• The market return and cash yield are inputs, not predictions.
• The DCA tranche is the amount divided by the number of months, fixed at the start; interest earned by waiting cash is held in cash to the horizon.
• No taxes on gains or interest, no fees, no dividends beyond what the return assumption includes.
• Both sides are compared at a single horizon, 36 months here. The model does not measure how far either side fell along the way. The Vanguard paper names limiting that drawdown, for loss-averse investors, as what cost averaging can offer; this model does not score it.

Method and sources

The model is calculateLumpSumVsDca in the lump sum vs. DCA calculator. Each annual rate is converted to a monthly rate geometrically, and both sides are simulated month by month to the horizon. Every figure above is produced by running the model on the inputs in the scenario links.

• Investor.gov, Dollar Cost Averaging: investing money in equal portions, at regular intervals, regardless of the ups and downs in the market.
• Vanguard, Cost averaging: Invest now or temporarily hold your cash? (Finlay and Zorn, 2023): lump-sum investing outperformed a three-month cost-averaging split 68% of the time (MSCI World, 1976–2022); 66.4% for the U.S. (Russell 3000, 1979–2022); 65% for an all-equity portfolio when the waiting cash earns interest.

Open this scenario in the calculator

All figures on this page come from the Lump Sum vs. DCA calculator. Change any input there and the numbers update.